Problem
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22,741 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $293. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.
|
Year
|
1
|
2
|
3
|
4
|
|
Sales
|
$11,369
|
$12,774
|
$13,543
|
$10,467
|
|
Costs
|
2,154
|
2,931
|
3,410
|
1,465
|
|
NWC Requirements
|
337
|
354
|
233
|
0
|
What is the project's NPV? (Round answer to 0 decimal places. Do not round intermediate calculations).